What is Velocity Banking? A Complete Guide
Learn how velocity banking really works, what the common misconceptions are, and why a disciplined extra-payment strategy may actually be the smarter approach.
Velocity banking is a debt payoff strategy that uses a Home Equity Line of Credit (HELOC) as a hub account to accelerate mortgage repayment. The core idea is straightforward: instead of letting your paycheck sit in a checking account, you deposit it directly into a HELOC, which temporarily reduces the HELOC balance and the daily interest accruing on it. Then you pay your living expenses from the HELOC throughout the month.
Periodically, when enough surplus cash has accumulated on the HELOC, you make a large "chunk payment" toward your mortgage principal. Because mortgages calculate interest on outstanding principal, this lump-sum payment reduces the interest portion of every future payment, allowing more of each payment to go toward principal.
The cycle repeats: income flows in, expenses flow out, leftover surplus grows on the HELOC, and once a threshold is reached, another chunk payment hits the mortgage. Over time, the mortgage balance drops faster than it would with standard payments alone.